Fractional Ownership

[Suma]

The other problem with an LLC is that if one member decides to stop paying their share of the mortgage payments, the other(s) have to pay it. Personal experience with this.

 

[Matt J]

The other problem with an LLC is that if one member decides to stop paying their share of the mortgage payments, the other(s) have to pay it. Personal experience with this.

Include a claus for forfeiter or default. Worded correctly it shouldn't be a problem.

 

[TooFarTampa]

Include a claus for forfeiter or default. Worded correctly it shouldn't be a problem.

But a clause won't force a broke person to pay the bills. It isn't like child support. Maintaining the necessary cash flow should be well considered, well in advance. ;-)

 

[Smiling JOe]

Partnership or Corporation, with someone defaulting, the other(s) are left paying for the one(s) who don't, unless they want to be in default. If the people pay cash in full, it will be less likely to have problems, but those unforeseen things happen, like divorce, lawsuit, medical emergencies, etc, and that could mess up someone's financial status overnight.

 

[SHELLY]

Full Disclosure: I am a Realtor.
Let's throw up some real numbers. Not everyone should buy real estate. Being an owner of a vacation home is as much a social status or lifestyle thing, as it is an investment. I mentioned renting a place for the five weeks and pocketing the difference.

BRAVO!

Let's compare purchasing a fractional (five weeks use) for $150,000 to renting the house, currently available for long term rent in Grayton Beach.
For the fractional purchase, you put down 20% (not like the old days), which is $30,000, leaving you a note of $120,000. Let's say you get a 30year fixed rate of 6%, to keep the math simple. Your annual expense of the interest and principle is $8,640. You really don't build much equity in the first 7 years (average length of ownership for a home), and the value of your fractional probably won't be increasing much over time (just my educated guess). Remember the opportunity cost of your $30,000. Even with a 4% interest on that $30,000, that is an additional $1,200 per year. Also remember the monthly dues and fees, and assessments when the units are refurbished. Adding up the $8,640 and the $1,200, plus another $1,500 (guesstimate of additional expenses) that is a total of $11,340 per year, for your five weeks of use of a fairly small unit.

Nice calculator work! But when it comes to the WaterColor PRC you've undershot the $1500 "guestimate of additonal expenses." According the the WC website FAQs:

How much are the monthly assessments and what do the assessments cover?
Each Owner will initially pay a monthly assessment of approximately $450 per month, which, among other things, covers the Owner?s portion of the following expenses: utilities, insurance, real estate taxes, reserves for replacement of the furnishings, building maintenance, assessments due to WaterColor Community Association, housekeeping for up to 5 visits per year, and reservation and other services.

That's $5400 per year.

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[Smiling JOe]

Without looking, I wanted to be conservative in my example with the residence club. I was even doing so with the price, but thanks for finding the real number. As was mentioned by several people, furniture wears out, and TVs break, and they just add that to your assessments, and replace whatever is in less than perfect condition.

 

[TooFarTampa]

Nice calculator work! But when it comes to the WaterColor PRC you've undershot the $1500 "guestimate of additonal expenses." According the the WC website FAQs:

How much are the monthly assessments and what do the assessments cover?
Each Owner will initially pay a monthly assessment of approximately $450 per month, which, among other things, covers the Owner?s portion of the following expenses: utilities, insurance, real estate taxes, reserves for replacement of the furnishings, building maintenance, assessments due to WaterColor Community Association, housekeeping for up to 5 visits per year, and reservation and other services.

That's $5400 per year.

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WOW.

 

[SHELLY]

Without looking, I wanted to be conservative in my example with the residence club. I was even doing so with the price, but thanks for finding the real number. As was mentioned by several people, furniture wears out, and TVs break, and they just add that to your assessments, and replace whatever is in less than perfect condition.

...and if any/all of the other '7 fractional owners' are beasts and like to tear things up, well, those assessments might get a bit steep--unless you all decide to go with futons, Walmart plastic chairs and cable-spool-tables.

I imagine the "full residence" WaterColor owners would think of the "fractionals" as coming from the other side of the tracks as it is.

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[Rita]

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[Smiling JOe]

I'm sure that since all of units are shared with other unit owners, not just the other seven of your unit, an individual unit has no say in the almost impossible to fold up futon sofa/beds, and you each unit will be similarly furnished.